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3 Replies Last post: May 17, 2008 4:07 PM by Santa Fe CPA

accounting entry question

May 17, 2008 7:33 AM

t1luke 5 posts since
May 17, 2008

I would like to know the correct way to set up or how I would track the use tax - I have it like this now - I make an entry into AR and to expense, then when I pay it at end of quarter my entry is Checking acct and AR. is this correct ?

Thanks

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LUCKIEST 7,939 posts since
Aug 6, 2007

1. Re: accounting entry question May 17, 2008 7:55 AM

accounting entry question, Welcome, Do you have an Accountant??

When you sell an item it is a Debit to Cash or A R,
A Credit to Sales and another credit to Sales or Use Tax Payable.

At the end of the quarter, you pay the tax, A Debit to the Payable and a Credit to Cash.

Sales or Use Tax is NOT an expense.

LUCKIEST

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t1luke 5 posts since
May 17, 2008

2. Re: accounting entry question May 17, 2008 8:17 AM

in response to: LUCKIEST

No Accountant yet - very small and new custom woodworking business. I have bought some supplys "wood screws and such" over the internet and did not pay sales tax on them that is why I think it is an expense.

Thanks again

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Santa Fe CPA 67 posts since
Oct 10, 2007

3. Re: accounting entry question May 17, 2008 4:07 PM

Use tax applied to a purchase of a tangible product that was not previuosly taxed is a tax expense item.
You should calculate the tax based upon your locality's tax rate and book the amoun as as expense offset by the tax payable account then pay from a cash disbursement offsetting the payable.

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ForumsAccounting and Budgeting

This Question is Answered

accounting entry question

May 17, 2008 7:33 AM

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